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FormFactor (FORM) Beats Earnings & Revenue Estimates in Q2

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FormFactor Inc. (FORM - Free Report) reported second-quarter adjusted earnings of 27 cents per share, beating the Zacks Consensus Estimate by 3 cents. Also, earnings increased 75% sequentially but decreased 40% year over year.

Revenues decreased 5.9% from the year-ago quarter but were up 14.6% sequentially to $135.5 million, beating the Zacks Consensus Estimate of $134 million. The figure was within the company’s guided range of $130-$138 million.

Strong demand from the company’s largest customer aided second-quarter revenues.

The company's shares have gained 1.8% in the past 12 months against the industry’s loss of 3%.

 

 

Quarter Details

Probe card segment revenues were $111.6 million in the second quarter, up $16.7 million from the last reported quarter.

Within the probe card segment, Foundry & Logic revenues (46% of the revenues) increased on a sequential basis to $62.1 million. The increase was attributable to higher-than-anticipated revenues from the company’s largest customer.

During the quarter, FormFactor witnessed sequential increase in shipments of a new design to a foundry, which utilizes probe cards and advanced packaging applications at leading edge nodes. Moreover, probe card for RF applications increased in the second quarter.

Revenues for DRAM products (28% of the revenues) were $38.1 million, up 26% sequentially. Management stated that DRAM demand environment was robust in the quarter. Technology node transitions and a strong datacenter demand environment continued to positively impact probe card demand.

Flash revenues were $11.4 million, up sequentially. Almost half of the flash revenues were from NAND flash applications.

Systems revenues increased sequentially in the second quarter to $23.9 million.

Operating Details

On a non-GAAP basis, gross margin contracted 170 basis points (bps) year over year but expanded 260 bps to 45.9%. The sequential increase was primarily due to a favorable product mix.

Non-GAAP operating expenses, including ERP implementation costs, were $39.6 million, up $3 million from the last reported quarter.

Balance Sheet & Cash Flow

As of Jun 30, 2018, cash (comprising cash and cash equivalents, as well as marketable securities) was $142.9 million compared with $142.1 million in the last reported quarter.

Cash from operations was $20.7 million compared with $9.3 million in the first quarter. Free cash flow was $16.8 million, up from $6.3 million in the last reported quarter.

Guidance

FormFactor expects third-quarter 2018 revenues between $130 million and $138 million. The Zacks Consensus Estimate for revenues is currently pegged at $136 million.

On a non-GAAP basis, the company projects gross margin within 42-45% and earnings in the band of 20-26 cents per share. The Zacks Consensus Estimate for earnings is pegged at 25 cents.

FormFactor, Inc. Price, Consensus and EPS Surprise

 

FormFactor, Inc. Price, Consensus and EPS Surprise | FormFactor, Inc. Quote

Zacks Rank & Stocks to Consider

Currently, Formfactor carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same industry include Integrated Device Technology, Inc. (IDTI - Free Report) , Infineon Technologies AG (IFNNY - Free Report) and Rambus Inc. (RMBS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Integrated Device, Infineon Technologies and Rambus is currently projected to be 12.2%, 6.1% and 10%, respectively.

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